Corey Robin’s Incredible Breakdown of Democrats as the Party of Austerity

I want to go back to Corey Robin’s incredible take on austerity politics in the Democratic Party, through the lens of how Republicans once embraced, and then abandoned it. The fact that you can draw a line in inverse proportion between what party embraces austerity and what party has the dominant position in the politics of the age should tell you what you need to know about its importance. By and large, we saw a liberal era in the 1950s and 1960s (regardless of what party actually ruled) followed by a conservative era in the 1980s that stretches to this day. And the factor of austerity politics plays a big role in that.

Over time, Republicans stopped trying to be the responsible “tax collectors for the welfare state,” and started becoming the starve-the-beast Republicans we know now. These theories are flawed – cutting taxes does not, actually, lead to cutting spending, at least not when Republicans are in office – but politically they force the other side into an extremely disadvantageous position. I was pleased to see Jude Wanniski discussed in Robin’s piece. Years ago for Calitics I wrote this story about Wanniski’s “Two Santa Claus” theory, which is essentially the road that national Republicans took:

Democrats, (Wanniski) said, had been able to be “Santa Clauses” by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people’s taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.

There was no way, Wanniski said, that the Democrats could ever win again. They’d have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.

And Democrats took the bait. Robin goes through the Republican evolution, and then unearths this convention speech from Walter Mondale in 1984 making the evolution complete. Democrats killed Santa Claus, and they have been doing the same thing for the last 30 years. [cont’d.]

Consider the two major presidential cycles of the last three decades: Reagan/Bush-Clinton and Bush-Obama.

During the 1980s, the Republicans cut taxes and ran up huge deficits. Then Bill Clinton came into office and announced his intention to reduce deficits. Anxious to appease Robert Rubin and the bond market, he abandoned whatever pretense of a progressive economic agenda he had set out during the campaign. He and the Democrats raised taxes and allowed government spending to decline dramatically as a percentage of GDP. By the end of his second term, Clinton had managed to generate a surplus—with the explicit purpose of not only reducing the debt but also shoring up Social Security—only to have the Bush White House squander that surplus through massive tax cuts and increased military spending.

When Barack Obama assumed office in 2008, he faced a similar conundrum as Clinton. The Bush Republicans had run up massive deficits and debt. Though the financial crisis (and his overwhelming victory) seemed to give Obama the warrant to spend—remember when we were all Keynesians again?—he was constrained by congressional Republicans and conservative elements in his own party, including the Wall Streeters who had been among his earliest supporters and happened to have a disproportionate influence in the White House. All of these forces seemed to worry more about the deficit than they did about the recession. The result, of course, was a much smaller stimulus package than many progressives had hoped for.

Similarly, the health care bill was sold on “bending the cost curve” and constrained by statutory paygo, which made it impossible to bring forward a new program with any deficit spending. Obama turned to austerity rhetorically in 2010 when there were large majorities in Congress, and by the middle of that year fiscal policy had turned negative at the federal level. We have the lowest number of federal employees as a share of the population since the 1960s, and the lowest amount of public investment in terms of discretionary spending as a share of GDP since the Eisenhower Administration. I know this because Obama touts it, over and over.

Robin is talking in political terms about the dangers of austerity. You can argue about the propriety of budgetary discipline; certainly at this point we need larger deficits. On politics, it’s not arguable that the party of austerity has severe problems with the public in terms of getting their stated goals into action. Robin concludes:

So here we are, entering a campaign with Obama begging the media to recognize him and the Democrats as the party of austerity—for being willing to make difficult and deep cuts to Medicare and Social Security—and Republicans happily calling for a constitutional amendment requiring congressional super majorities for tax increases […]

Ironically, it was during the heyday of the New Deal that we first got a glimpse of the way we live now—from none other than John Kenneth Galbraith. As Bartlett shows, when Galbraith learned of Kennedy’s plans for a large tax cut in 1962, he shrewdly observed in his diary that “lower tax revenues will become a ceiling on spending.” Though the economics of the tax cut were impeccably Keynesian, Galbraith was far more concerned about the politics, which he thought were dangerous. As he explained in his testimony to Congress in 1965:

“I was never as enthusiastic as many of my fellow economists over the tax reductions of last year. The case for it as an isolated action was undoubtedly good. But there was danger that conservatives, once introduced to the delights of tax reduction, would like it too much. Tax reduction would then become a substitute for increased outlays on urgent social needs. We would have a new and reactionary form of Keynesianism with which to contend.”

There’s a wide gulf between being the party of responsibility and the party of progress. Being the “austerians of reactionary Keynesianism,” as Robin calls it, does nothing to endear America to a policy framework over the long term.

Corey Robin’s Incredible Breakdown of Democrats as the Party of Austerity

I want to go back to Corey Robin’s incredible take on austerity politics in the Democratic Party, through the lens of how Republicans once embraced, and then abandoned it. The fact that you can draw a line in inverse proportion between what party embraces austerity and what party has the dominant position in the politics of the age should tell you what you need to know about its importance. By and large, we saw a liberal era in the 1950s and 1960s (regardless of what party actually ruled) followed by a conservative era in the 1980s that stretches to this day. And the factor of austerity politics plays a big role in that.

Over time, Republicans stopped trying to be the responsible “tax collectors for the welfare state,” and started becoming the starve-the-beast Republicans we know now. These theories are flawed – cutting taxes does not, actually, lead to cutting spending, at least not when Republicans are in office – but politically they force the other side into an extremely disadvantageous position. I was pleased to see Jude Wanniski discussed in Robin’s piece. Years ago for Calitics I wrote this story about Wanniski’s “Two Santa Claus” theory, which is essentially the road that national Republicans took:

Democrats, (Wanniski) said, had been able to be “Santa Clauses” by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people’s taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.

There was no way, Wanniski said, that the Democrats could ever win again. They’d have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.

And Democrats took the bait. Robin goes through the Republican evolution, and then unearths this convention speech from Walter Mondale in 1984 making the evolution complete. Democrats killed Santa Claus, and they have been doing the same thing for the last 30 years.

Consider the two major presidential cycles of the last three decades: Reagan/Bush-Clinton and Bush-Obama.

During the 1980s, the Republicans cut taxes and ran up huge deficits. Then Bill Clinton came into office and announced his intention to reduce deficits. Anxious to appease Robert Rubin and the bond market, he abandoned whatever pretense of a progressive economic agenda he had set out during the campaign. He and the Democrats raised taxes and allowed government spending to decline dramatically as a percentage of GDP. By the end of his second term, Clinton had managed to generate a surplus—with the explicit purpose of not only reducing the debt but also shoring up Social Security—only to have the Bush White House squander that surplus through massive tax cuts and increased military spending.

When Barack Obama assumed office in 2008, he faced a similar conundrum as Clinton. The Bush Republicans had run up massive deficits and debt. Though the financial crisis (and his overwhelming victory) seemed to give Obama the warrant to spend—remember when we were all Keynesians again?—he was constrained by congressional Republicans and conservative elements in his own party, including the Wall Streeters who had been among his earliest supporters and happened to have a disproportionate influence in the White House. All of these forces seemed to worry more about the deficit than they did about the recession. The result, of course, was a much smaller stimulus package than many progressives had hoped for.

Similarly, the health care bill was sold on “bending the cost curve” and constrained by statutory paygo, which made it impossible to bring forward a new program with any deficit spending. Obama turned to austerity rhetorically in 2010 when there were large majorities in Congress, and by the middle of that year fiscal policy had turned negative at the federal level. We have the lowest number of federal employees as a share of the population since the 1960s, and the lowest amount of public investment in terms of discretionary spending as a share of GDP since the Eisenhower Administration. I know this because Obama touts it, over and over.

Robin is talking in political terms about the dangers of austerity. You can argue about the propriety of budgetary discipline; certainly at this point we need larger deficits. On politics, it’s not arguable that the party of austerity has severe problems with the public in terms of getting their stated goals into action. Robin concludes:

So here we are, entering a campaign with Obama begging the media to recognize him and the Democrats as the party of austerity—for being willing to make difficult and deep cuts to Medicare and Social Security—and Republicans happily calling for a constitutional amendment requiring congressional super majorities for tax increases […]

Ironically, it was during the heyday of the New Deal that we first got a glimpse of the way we live now—from none other than John Kenneth Galbraith. As Bartlett shows, when Galbraith learned of Kennedy’s plans for a large tax cut in 1962, he shrewdly observed in his diary that “lower tax revenues will become a ceiling on spending.” Though the economics of the tax cut were impeccably Keynesian, Galbraith was far more concerned about the politics, which he thought were dangerous. As he explained in his testimony to Congress in 1965:

“I was never as enthusiastic as many of my fellow economists over the tax reductions of last year. The case for it as an isolated action was undoubtedly good. But there was danger that conservatives, once introduced to the delights of tax reduction, would like it too much. Tax reduction would then become a substitute for increased outlays on urgent social needs. We would have a new and reactionary form of Keynesianism with which to contend.”

There’s a wide gulf between being the party of responsibility and the party of progress. Being the “austerians of reactionary Keynesianism,” as Robin calls it, does nothing to endear America to a policy framework over the long term.